LKP Securities
Sun TV Network (Buy)
CMP: ₹460.75
Target: ₹596
Sun TV’s subscription revenues are growing at a strong pace of over 20 per cent as digitisation wave with the New Tariff Order (NTO) tailwinds are impacting the business positively. Digitisation is also proliferating with momentum in Tamil Nadu with market conditions easing over there.
Although its ARPU has declined in the past quarter, its stable now leading the DTH business to grow at a decent rate of 5-10 per cent. Management indicated that digitisation is progressing well in Tamil Nadu and has a further potential of 4-5 million households. A higher contribution of DTH should aid in Sun TV realising a higher ARPU.
Digitisation has led to good increase in ARPU of Sun TV and will rise further as the process reaches completion. Company’s higher focus on the digital side of business with Sun investing ₹150 crore in it over the next 18 months will aid subscription revenues to a higher extent.
The company has recently struck deals with Jio Cinema and a big telco, which would help subscription growth. Sun TV’s Ad business is going through a challenging period currently, with growth slowing down significantly. The company is slowly and steadily gaining viewership market share in its flagship channels. Advt revenues are expected to recover FY21 onwards, while subscription revenues will continue with its strong run over the next couple of years at least.
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